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Pro Traders: QE2 Coming to an Abrupt End?

Again, on Thursday, the S&P closed in negative territory with many investors focused on unrest in oil exporter Libya.

However, the Fast Money traders always keep an ear to the ground and chatter suggests another – and more powerful catalyst - may be the real reason behind the sell-off.

According to the traders, market pros are growing worried that Fed is about to pull the punch bowl off the table.

(That’s trader speak -- in other words QE2 may be coming to an end ahead of schedule. As you can see from this chart the S&P began moving sharply higher in late summer, when talk of QE2 first hit the market.)

The sudden and sharp shift in market sentiment follows commentary from St. Louis Fed Reserve President James Bullard who’s largely seen as a centrist.

Speaking at a Chamber of Commerce breakfast held at Western Kentucky University he said, "The natural debate now is whether to complete the program or to taper off to a somewhat lower level of assets."

And to make the issue that much more volatile for traders, Bullard also said that he expects the topic to be discussed at a Fed meeting in March. He said he would be ready to scale back the program then.

"If it was just me, I would make small changes to account for the fact that the outlook is better than it was at the time of the November decision," he told reporters after his speech.

And it’s not just Bullard, Charles Plosser, the head of the Philadelphia Federal Reserve Bank says much the same.

"Should economic prospects continue to strengthen, I would not rule out changing the policy stance to bring QE2 to an early close," Plosser said.

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What does this mean for your money? How should you position now?

According to CNBC’s Rick Santelli the chatter will generate selling, whether its accurate or not. “There is going to be a segment of the market that buys into it,” he says.

However, if you’re one of those investors inclined to sell the Fast Money traders suggest taking a beat before you do.

Karen Finerman cautions not to look at an early end to QE2 in a vacuum. “It could very well be a signal that the recovery is robust,” she reminds and that could drive the S&P higher.

Joe Terranova thinks the chatter is a lot of tempest in a pot of tea; he doesn’t think there’s anyway the Fed ends QE2. Quite simply he thinks there are too many wildcards such as housing, unemployment and oil that still threaten the recovery.

Tim Seymour says much the same. And he reminds, “A weaker dollar is good for the US economy,” he adds.

And if you’re looking for key technical levels to watch, Guy Adami says watch 1275.

That level represents the 2011 low hit at the end of January. "The question is, what happens when we get there," he says.

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FINERMAN’S FINE PRINT: AVON

Looking at individual names, trader Karen Finerman has Avon on her radar after the company announced its biggest restructuring in years.

”I’m intrigued,” she says. “I feel like they should be firing on all cylinders and yet something keeps mucking them up.”

”I’m already long, she adds. "This is such a valuable franchise it wouldn’t surprise me if some activist takes a look.”

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TICK BY TICK: TARGET

Elsewhere in the market, the traders were closely watching the action in Target which experienced a big intra-day spike after the company posted a 10.5 percent increase in quarterly profit, helped by strong sales early in the holiday season and fewer write-offs of bad credit card debt as shoppers' finances continued to improve.

What should you male of it?

Karen Finerman finds these developments bullish. “They’re very confident in their business even in the face of rising oil.”

Patty Edwards is holding Target. "I think they’re doing all the right things and think it will do well over the long-term. But I also think investors can wait before they jump in."

Guy Adami agrees that valuations are compelling but adds, "you could have said that for a while now."

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GM BREAKS BELOW $33 IPO PRICE

GM traded notably lower Thursday with the stock breaking below GM’s IPO price of $33.

What’s the trade?

Tim Seymour says he’s a buyer of weakness and not just in GM. He also likes the pullback in Toyota and Tata.

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TANKER DECISION

After the bell the Pentagon came out with its long awaited $35 billion tanker contract decision awarding the deal to Boeing.

Get all the details from Jane Wells. Watch the video now!








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Trader disclosure: On Feb 24, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour owns (AAPL); Seymour owns (BAC); Seymour owns (F); Seymour owns (FCX); Seymour owns (GE); Seymour's firm owns (GM); Seymour's firm owns (PBR); Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Adami's wife works for (MRK); Finerman's Firm Is Short (IWM); Finerman's Firm Is Short (SPY); Finerman's Firm Is Short (MDY); Finerman's firm is short (XRT); Finerman's firm is short (IJR); Finerman's Firm Is Long S&P Puts; Finerman's Firm Is Long Russell 2000 Puts; Finerman's Firm And Finerman Own (AAPL); Finerman's firm owns (AVP); Finerman's Firm Owns (BAC) Leap, Finerman Owns (BAC); Finerman's Firm Owns (BBY); Finerman's Firm And Finerman Own (BP); Finerman owns (DECK); Finerman's firm owns (FCX) puts; Finerman Owns (GOOG); Finerman's Firm And Finerman Own (HPQ); Finerman's Firm Owns (IBM); Finerman's Firm Owns (JPM), (JPM) Leap; Finerman Owns (JPM); Finerman's Firm Owns (M); Finerman's Firm And Finerman Own (MSFT); Finerman's Firm Owns (WMT); Terranova Owns (VRTS); Terranova Owns (C); Terranova Owns (UPL); Terranova Owns (ABT); Terranova Owns (MS); Terranova owns (TEVA); Terranova Owns (BAX); Terranova Owns (CVI); Terranova Owns (RSX); Terranova Owns (SU); Terranova Owns (CNQ)


For Joe Terranova
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Reggie Middleton
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Fast Fire SOT
Seymour's firm owned (TTM) on 2/18/2011

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